Setting aside a public examination summons

Recently, in two separate decisions, the Federal Court of Australia considered the basis or bases for the discharge, stay or setting aside of a summons for examination under section 596A or 596B of the Corporations Act 2001 (Cth) (Act).

Kimberley Diamond Company Pty Ltd (in liq) [2016] FCA 1016

The liquidator of Kimberley Diamond Company (KDC) was issued with an examination summons by Kimberley Diamonds Limited (KDL) who had successfully applied to ASIC for “eligible applicant” status enabling them to bring the examination summons where they would otherwise not have had standing to do so.  

The purpose of the examination summons was to investigate the sales and marketing process for a diamond mine undertaken in the liquidation.  The summons was a direct challenge to the integrity of the liquidation process.

The liquidators of KDC had issued a Notice of Disclaimer of Onerous Property in relation to the mine due to the significant costs of continuing occupation of the mine.  KDL stated, in their view, that if properly marketed and sold, the proceeds of the sale of the mine may have met the claims of all KDC’s creditors resulting in a dividend to KDL as shareholder.

The liquidator of KDC sought an order that the examination summons be discharged, set aside or permanently stayed, on the basis that it was an abuse of process.

Special position of liquidators

Liquidators are in special category compared with some of the other types of persons who may be summonsed for examination in that they are treated “virtually as the delegate of the Court.”[1]

Any challenge to the integrity of the liquidation process requires justification and the Court will avoid intrusion into the regular process of administration of the liquidation and prevent the liquidator from being required to account on oath for the exercise of discretions and commercial judgments unless there is a suggestion of lack of good faith or breach of duty.

When considering a summons for public examination of a liquidator, in exercising its power, the Courts will:

  • assess its role in protecting the integrity of the winding up and ensuring that the winding up is conducted in a timely and efficient manner; and
  • be reluctant to interfere with decisions of liquidators involving the exercise of commercial judgment.


The Court found that KDL did not justify the examination summons and set out the positive evidence which it would have required in these circumstances as follows:

  1. fraud, dishonesty or other misconduct, or any lack of bona fides on the part of the liquidators in connection with the sale process;
  2. any conflict of interest or lack of impartiality affecting the liquidators’ conduct of the sale process;
  3. the sale process having been conducted in a manner which was inconsistent with the proper discharge of the liquidators’ functions.  For example, there was no evidence of any improper purpose on the part of the liquidators in the manner of their conduct of the sale process;
  4. any particular flaw in the liquidators’ exercise of commercial judgment in connection with the disclaimer of the mine; or
  5. that there may have been a different outcome, more favorable to the liquidation, if the liquidators had conducted the sale process differently.

Gleeson J ultimately found that there was no realistic prospect that the examination would have any practical utility.  The examination summons was found to be an abuse of process and was stayed.

Queensland Nickel Pty Ltd (In Liq) v Parbery, in his capacity as Liquidator of Queensland Nickel Pty Ltd (In Liq) [2016] FCA 1048 and [2016] FCA 1094

The applicants in this case sought to set aside examination summonses obtained by the Special Purpose Liquidators of Queensland Nickel Pty Ltd (QN) on a number of bases which the Court found were not arguable.

Abuse of process

The applicants' first basis was that the documents required to be produced resulted in an abuse of process due to the scope of the categories of documents sought, and that it was not possible to comply with the due date for production of the documents. 

Greenwood J stood this matter over as the applicants were in discussions with the Special Purpose Liquidators with a view to extending the date for compliance with the production of the documents.

The applicants argued a liquidator cannot examine a person about things which the liquidator ought to know, or alternatively, that a liquidator cannot examine a person about matters that a liquidator knows he does not know. 

Perram J concluded that an abuse of process argument could not be extracted from the proposition that the liquidator had not yet read the documents or he had not formed a conclusion in relation to matters contained in the documents.

Oppressive nature of the examination summons 

The General Purpose Liquidators of QN had previously issued examination summonses and the applicants claimed that compliance with both summonses would be oppressive. 

Greenwood J concluded there was no evidence that any of the examination summonses obtained by the General Purpose Liquidators had been served upon the applicants and orders for the appointment of the Special Purpose Liquidators expressly provided the ability to conduct examinations of this kind.

Power to grant the examination summons was unconstitutional

The applicants argued that the power conferred upon the Court by section 596A and 596B of the Act is not validly conferred under the Constitution in that the Commonwealth Parliament is incapable of conferring power which is not judicial “in character” or at least “incidental” to judicial power.

This issue was extensively examined in the matter of Saraceni v Jones [2012] WASCA 59; [2012] HCA 38 and Greenwood J saw no reason to depart from those observations.

At [43] Greenwood J set out that examinations are conducted before the Court (not “by” the Court) with a view to ensuring the process is not abused or conducted oppressively and both sections reflect valid laws of the Commonwealth.


The applicants failed to have the examination summonses stayed or set aside on all bases argued and were ordered to pay the liquidator’s costs.

Lavan Legal comment

The purpose of granting an examination summons must always be to benefit a company, its creditors, members or the public generally.  An applicant seeking to set aside an examination summons must clearly identify an abuse of process which involves some concept of using powers for purposes for which they are not conferred.


[1] Re Biposo Pty Ltd; Condon v Rodgers (1995) 120 FLR 399 at 403.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.